Gold surged to a 16-week high of $1,667 and silver passed $30 an ounce as speculation mounted about a new stimulus package from the Federal Reserve and the prospect of similar actions by all the global central banks this autumn.

Readers of ArabianMoney will not be surprised by this seasonal pattern re-occuring. The autumn is usually the best period for gold and silver prices and this year looks no different (click here). Our next monthly newsletter will consider in-depth how best to invest in gold and silver (subscribe here).

Right trade

Those investors who have stayed out of precious metals in the expectation of a big price correction this autumn look to be on the wrong side of this trade and as they reverse position that should push the prices up much higher.

As ArabianMoney argued earlier when this correction finally comes it will be from a much higher price level. Money printing is indeed what makes gold and silver a win-win proposition this fall.

The anticipation of more money printing will take gold and silver prices up. When it happens – most likely after some kind of financial crash in our opinion than before it – then that will boost prices even higher, although a short-term correction would be perfectly normal.

The stage is being set for a powerful advance for precious metals on the back of weak economic fundamentals and desperate interventions by global central banks. Make no mistake this is not good news for the economy.

The central banks are going to have to pull out all the stops to head off deflation, something that would be a disaster for the banking system as the huge debts would overpower it. They have no alternative really and that makes gold and especially silver a one-way bet, albeit with some volatility on the way up.

Inflation happening

Inflation of the money supply will gradually correct the debt position by rebalancing the value of goods and services. It will be particularly painful for those sat on cash, bonds and fixed incomes.

But it works in favour of those investors with fixed assets like gold and silver, farmland, paintings and even real estate in markets that have bottomed out like the US or Dubai, though not those such as the UK where prices have yet to properly correct.

Get on the right side of macroeconomics and you can relax, get it wrong and you are history!